Kempton Ingersol’s job is considerably more fun than the average portfolio manager. Ingersol, who is the managing director and senior portfolio manager at Brown Capital Management (No. 13 on the BE Asset Managers list with $1.2 billion in assets), is charged with identifying investment-worthy small-cap companies whose innovative technologies or groundbreaking business models show big promise. Small-cap firms are those whose outstanding shares are valued between $250 million and $1 billion.
Ingersol isn’t fooled by whiz-bang techno-speak. His investment strategy is based on a given company’s ability to grow revenues. “We look at a three- to five-year investment horizon to identify companies with products or services which have competitive advantages that are sustainable over time. We are truly long term,” says Ingersol. In that regard, he shies away from offering 12-month share price targets. “The core of our program contains old-fashioned and rigorous fundamental analysis to identify exceptional small companies that we think can grow to become exceptional larger companies,” he notes. Ingersol spoke to Black Enterprise about the economy and some of his favorite small-cap companies.
What’s your take on the state of the overall economy right now?
I think we’re seeing a lot of mixed signals in the economy. You see some positive information periodically for unemployment data or manufacturing, retail sales, or housing—and then it’s countered with negative data. So I’m not seeing a strongly positive trend yet. Obviously things have improved. But as you hear about the declarations of the recession ending, it doesn’t feel like that for the millions of unemployed people. We’re not yet seeing significant job creation. And that’s necessary to improve consumer confidence and consumer spending.
The types of companies you cover—smaller publicly traded enterprises—are they generally in a position to start hiring and creating jobs?
Yes, they are. We’ve seen a number of our companies over the last year making increased investments within the company, preparing themselves for the future turnaround. So, while there’s been some cost-cutting, there have been areas where they’ve said, “We see an opportunity out there so we are going to increase staffing in research and development, in sales, or whatever is most critical for them. One of the characteristics of companies we identify is that they tend to have a significant amount of cash on the balance sheet, with little or no debt. So that allows them to invest in their companies even during a period when credit is tight.